Monday, January 6, 2014

The US Department of Justice recently announced another historic year in FY 2013 for False Claims Act (FCA) recoveries and judgments: a total of $3.8 billion, falling short of 2012's nearly $5 billion in FCA recoveries. Among the highlights featured in the DOJ's press release are:

Heath care fraud continued to constitute the largest portion of FCA recoveries: $2.6 billion, not including $443 million in recoveries by state Medicaid programs.

The largest component of the procurement fraud recoveries arose from the $664 million judgment that USDOJ obtained against United Technologies Corp. "based on allegations of false claims and corruption involving government contracts."

Qui tam suits "soared" to 752, an increase of 100 from FY 2012, and 74% increase over 2009, when 433 qui tam suits were filed.

Of the total $3.8 billion in FCA recoveries, $2.9 billion or 76% arose from qui tam filings, and of that amount, Relators or what the DOJ refers to as "courageous individuals who exposed fraud" recovered $345 million.

Last year also saw one of the largest FCA recoveries against a single individual/physician: $26.3 million against a dermatologist, Steven J. Wasserman, M.D., relating to illegal kickbacks.

Wednesday, January 1, 2014

Just recently, the U.S. Circuit Court of Appeals for the Fourth Circuit addressed whether the penalties assessed against a defendant under the False Claims Act ("FCA") can ever violate the 8th Amendment's protection against "excessive fines" in the appeal, United States ex rel Kurt Bunk & Daniel Heuser v. Birkart Globistics GmbH & Co et al., Case No. 12-1369 (4th Cir. 12/19/2013), a case about which I previously blogged. The 4th Circuit overturned the District Court's decision which had found the $50 million in penalties to be an excessive fine in light of the government's lack of damages. Essentially, the 4th Circuit avoided the constitutional issue by agreeing to the Relator's offer to accept $24 million in penalties in lieu of the entire $50 million that the District Court believed the FCA required to be imposed on the defendant. A few observations about the decision:

This FCA case concerned defendant contractors who moved the furnishings of U.S. military service personnel overseas to Europe and whether they colluded with subcontractors, resulting in the defendants charging inflated moving prices to the military. The Court began its opinion by observing, "An army may march on its stomach, but when a fighting force is deployed to a foreign front, familiar furnishings also serve to fuel the foray." These personnel whose goods were being transported were going to "encamp" in Europe. Once the Court characterizes these military personnel as "fighting forces deployed to a foreign front," you know for certain that the defendants will be losing and the court will fudge the constitutional issue.

One of the Relators, Bunk, who actually prevailed in this action never pled or proved any monetary damages caused by the defendants. The defendants sought to challenge Bunk's standing to bring this action in the absence of any damages, but the 4th Circuit found Bunk had standing.

Other settling defendants had already paid the government $14 million, which the District Court found "was far in excess of the presumptive damages" which were $895,000. The defendant had already paid that as restitution in a parallel criminal case.

The 4th Circuit affirmed that penalties were to be imposed on the basis of the false certifications contained in a defendant's claims for payments submitted to the government and that each certification qualified as a false claim giving rise to a penalty. Unfortunately for this defendant, there were 9,136 false claims or bills, and that amount multiplied by the minimal $5,500 penalty came to just shy of $50 million.

The Court acknowledged that the "perceived tension between the FCA and the Excessive Fines Clause of the 8th Amendment . . . is a monster of our own creation." To its credit, the Court candidly stated that "the FCA as enacted could arguably have been construed as authorizing a total civil penalty not to exceed $11,000." But, the Court observed further that it was following precedent -- bereft of any "our hands are tied" complaints -- in concluding that "FCA liability . . . attaches to the claim for payment."

The Court avoided a finding that the $50 million in penalties qualified as an excessive fine because the Relator agreed to accept only $24 million. The Relator's "voluntary remittitur," the Court observed, was "just the sort of arrow that a plaintiff is presumed to possess within his quiver" and that a plaintiff's discretion to take a "lesser judgment . . . is virtually unbounded." Here again, the Court relied on a prior FCA case, U.S. v. Mackby, 339 F.3d 1013 (9th Cir. 2003), in permitting this remittitur.

Essentially, the Court states that a District Court "must permit the government or its assignee [the Relator] the freedom to navigate its FCA claims through the uncertain waters of the Eighth Amendment."

As for the $24 million, the Court upheld the constitutionality of that amount by apparently disregarding the lack of evidence of any harm and finding that the "notion [that the government suffered no injury] seemingly inconsistent with [defendant's] apparent profit motive in making the statements at issue." The Court went on that "there is no doubt" -- even though the Court cites no evidence otherwise -- that "the government has suffered significant opportunity costs from being deprived of the use of those funds for more than a decade."

Finally, as mentioned above, the $24 million was not viewed as violating the Excessive Fines clause because it was not "grossly disproportionate" to the crime against the military. "The prevalence of defense contractor scams . . . shakes the public's faith in the government's competence and may encourage others similarly situated to act in a like fashion."

In short, given that the victim was the military, there was no way the Court was going find the FCA's penalties to be unconstitutional or use this decision as a vehicle to curb the FCA's excesses. Moreover, there is just something vaguely unsettling about hinging a court's determination of this statute's constitutionality not on its application and consequences, but on what the government and Relator will accept.

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About Me

A. Brian Albritton is a partner in the Tampa Office of Phelps Dunbar LLP. He concentrates much of his practice on “white collar” criminal defense and False Claims Act and Qui Tam litigation. He has defended numerous criminal and civil health care fraud, False Claims Act, and Qui Tam cases. Mr. Albritton served as U.S. Attorney for the Middle District of Florida in 2008-2010. During his tenure, he emphasized civil and criminal prosecution of health care fraud, and he worked to establish the Tampa Division’s Medicare Fraud Strike Force(the “HEAT Team”) and to resolve United States v. WellCare Health Plans, Inc., one of the nation's largest healthcare fraud cases in 2009. Mr. Albritton also served on the Health Care Fraud Subcommittee to the Attorney General's Advisory Committee. Prior to serving as U.S. Attorney, Mr. Albritton was a partner in the Tampa office of Holland & Knight LLP (1990-2008) and an Adjunct Professor at Stetson University College of Law (1998-2004) where he taught Federal Criminal Law and Federal Courts. He served as law clerk to U.S. District Judge Wm. Terrell Hodges, M.D. Fla, (1988-1990), and graduated with honors from Boston College Law School.